MBS Live: MBS Morning Market Summary
Bond markets walked in the door in moderately weaker territory today, but firmed up following weaker economic data and a technical support bounce in 10yr yields.  The technical support is somewhere in the neighborhood of 1.68 depending on whether you want to place more importance on the old "record low" in the mid 1.67's.  Either way, the moral of the story is that early weakness has stabilized nicely ahead of a relatively important 10yr auction.  Fannie 3.5's are hanging on to their same ledge of support from yesterday (and beyond) at 104-22.  Be on guard though...  First of all, it's not uncommon to see some weakness heading into an auction like this.  Additionally, a result that deviates greatly from the 1pm "when-issued" yield and the recent average bid-to-cover ratio could send things in one direction or another fairly quickly.  That said, there's no catastrophic downside risk for bond markets until 10yr yields are crossing back over 1.80.  So a break of the 1.68-ish pivot points seen in the two charts below, while definitely negative if they occur today, wouldn't be the end of the world.  

This longer term chart shows yields breaking the same pivot point that was unbroken in the shorter term chart above.  This is because the chart above only includes the higher-volume domestic trading hours while the daily chart below includes some of the spikier movement from the Asian and European sessions.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
104-23 : +0-02
FNMA 4.0
106-04 : -0-01
FNMA 4.5
107-05 : -0-01
FNMA 5.0
108-08 : -0-01
GNMA 3.5
106-25 : +0-01
GNMA 4.0
109-04 : +0-00
GNMA 4.5
109-24 : -0-03
GNMA 5.0
110-17 : -0-03
104-15 : +0-02
105-26 : -0-01
106-22 : +0-00
107-17 : -0-01
Pricing as of 11:06 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.

9:31AM  :  ALERT ISSUED: Bond Markets Battle Back Into The Green After AM Data
Bond Markets were weaker overnight led by extensive weakness in German Bunds and other high-quality European debt after Denmark (yes, Denmark... who knew?!) made a change to pension fund rules that affected demand in the European long-end (read more...). German Bunds shot higher in yield when they opened capping a 2 day move over 20bps higher.

Even now, Bunds are resisting the bounce back we've seen in Treasuries which has ushered the 10yr yield from an important pivot point around 1.68 to 1.6471 currently. MBS followed the bounce with Fannie 3.5's getting back into positive territory on the day if only by 2 ticks at 104-23.

It does seem like this morning's generally weaker economic data had a mildly salubrious effect on bond markets, but the reaction was noticeably delayed, and we could just as easily view it as a case of the data "not being enough" to prompt a break over the 1.68+ pivot point in 10's, thus suggesting a technically motivated bounce lower.

Either way, this is a good level of strength ahead of today's 10yr auction, but that auction raises some concern as to how sustainable the strength can be. Seeing as how this one will go off at record low yields and considering the rapid rise in guidance-giving European debt, any strength we can maintain into the auction is a bonus. We wouldn't be surprised to see a more aggressive concession heading into 1pm, which could look something like a re-test of the 1.68's. Incidentally, that major horizontal pivot point is also near the upper boundary of a downward-sloping trend channel, intact since early April. If we find ourselves breaking into the 1.7's today, it's negative mark against the long end of the yield curve and not likely to help production MBS at all. That said, weekend elections and next week's FOMC could completely reverse any swings that look like they might have medium to long term technical significance today.
8:41AM  :  ECON: Producer Prices Falling Faster, but Core Unchanged
* PPI - 1.0 pct vs -0.6 pct consensus and -0.2 pct previous
*Core PPI +0.2 pct, same as consensus and previous
* Energy -4.3 pct, most since March 2009

The Producer Price Index for finished goods fell 1.0 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods moved down 0.2 percent in April and were unchanged in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.8 percent in May, and the crude goods index fell 3.2 percent. On an unadjusted basis, prices for finished goods advanced 0.7 percent for the 12 months ended in May, the eighth straight month of slowing year-over-year increases following a 7.0-percent rise for the 12 months ended September 2011.
8:37AM  :  ECON: Retail Sales In Line With Expectations, Excluding Autos Much Weaker
* Headline Retail Sales down 0.2 pct, as expected
* Excluding autos down 0.4 pct vs 0.0 pct consensus

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $404.6 billion, a decrease of 0.2 percent (±0.5%)* from the previous month, but 5.3 percent (±0.7%) above May 2011. Total sales for the March through May 2012 period were up 5.7 percent (±0.5%) from the same period a year ago. The March to April 2012 percent change was revised from 0.1 percent (±0.5)* to -0.2 percent (±0.2%)*. Retail trade sales were down 0.2 percent (±0.5%)* from April 2012, but 5.0 percent (±0.7%) above last year. Nonstore retailers sales were up 12.4 percent (±3.1%) from May 2011 and motor vehicles and parts dealers were up 10.0 percent (±2.1%) from last year.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Victor Burek  :  "how much tax payer money is gonna be wasted with this political theartre"
Andrew Horowitz  :  "exactly, if lets say GM designs a car line that doesn't work, like lets say Saturn, should they be griled by congress now?"
Steven Fishman  :  "congess wants to tax the loss"
Victor Burek  :  "exactly...they lost their own money, not client money"
Matt Hodges  :  "what right does Congress have to grill him?"
Matt Hodges  :  "what law/regulation did they break/violate with those losses?"
Christopher Stevens  :  "looking forward to the ridiculous questions Congress will no doubt ask Dimon."
Jeff Anderson  :  "More crappy #'s. Just in time for the Fed meeting. I still don't think we're ready for QE3, but they'll consider it more as we get more reports like this. I'm kind of surprised equity futures aren't turning up yet."
Victor Burek  :  "give it time bc"
B-C  :  "or maybe not VB"
Matthew Graham  :  "RTRS- U.S. MAY PPI EXFOOD/ENERGY +0.2 PCT (CONS +0.2 PCT) VS APRIL +0.2 PCT "
Matthew Graham  :  "RTRS- U.S. MAY PPI -1.0 PCT (CONSENSUS -0.6 PCT) VS APRIL -0.2 PCT "
Victor Burek  :  "this should help us"
Matthew Graham  :  "RTRS - US MAY RETAIL SALES EX-AUTOS -0.4 PCT (CONS 0.0 PCT) VS APRIL -0.3 PCT (PREV +0.1 PCT) "
Matthew Graham  :  "RTRS - US MAY RETAIL SALES -0.2 PCT (CONSENSUS -0.2 PCT) VS APRIL -0.2 PCT (PREV +0.1 PCT) "
Ira Selwin  :  "All off of endorsed date unfotunately"
Joe Prine  :  "all about the endorsements"
Justin Dudek  :  "if a borrower closed in april 09, but has endorse date of 6/10- no chance of goong off new mi?"
Matt Hodges  :  "USD yes, Drachmas no"
Jeff Anderson  :  "GM, all. Article on CNBC says that Greeks are withdrawing over $1 billion dollars a day from the banks prior to the elections. Would that be considered a run on the banks. Yikes."
Adam Quinones  :  "...one could assume."
B-C  :  "so that next signal is probably towards lower rates right AQ?"
Adam Quinones  :  "stored energy doesnt imply a directional bias, it's just another way to say "we're moving sideways, consolidating profits, waiting for the next signal""
Brent Borcherding  :  "stored energy? I don't know, we have auctions, then greek elections, maybe we're just backing up to make a move lower."
Adam Quinones  :  "im sure he is using a bullish trend channel though"
Adam Quinones  :  "not sure where MG has his pivot...mine is around 1.68-1.70"
Adam Quinones  :  "def been consolidating Sam."

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